Question 1

Accumulated depreciation is shown on the balance sheet as a subtraction from the cost of its related asset.

Accepted Answer

A) True 
 B)False

Question 2

The usual order for the asset subgroups of a classified balance sheet is:

Accepted Answer

A)  Current assets,prepaid expenses,long-term investments,intangible assets.
B)  Long-term investments,current assets,plant assets,intangible assets.
C)  Current assets,long-term investments,plant assets,intangible assets.
D)  Intangible assets,current assets,long-term investments,plant assets.
E)  Plant assets,intangible assets,long-term investments,current assets.F) A) and C)
G) C) and D)

Question 3

Explain how the owner of a company uses the accrual basis of accounting.

Accepted Answer

The owner recognizes that financial info...

Question 4

During the closing process,Retained Earnings is closed to the Dividends account.

Accepted Answer

A) True 
 B)False

Question 5

Current liabilities are cash and other resources that are expected to be sold,collected or used within one year or the company's operating cycle whichever is longer.

Accepted Answer

A) True 
 B)False

Question 6

The current ratio is computed by dividing current liabilities by current assets.

Accepted Answer

A) True 
 B)False

Question 7

Normally closing entries are first entered in the general journal and then posted to the work sheet.

Accepted Answer

A) True 
 B)False

Question 8

A company purchased a new delivery van at a cost of $45,000 on July 1.The delivery van is estimated to have a useful life of 6 years and a salvage value of $3,000.The company uses the straight-line method of depreciation.How much depreciation expense will be recorded for the van during the first year ended December 31?

Accepted Answer

A)  $3,250.
B)  $3,500.
C)  $4,000.
D)  $6,500.
E)  $7,000.F) A) and B)
G) A) and C)

Question 9

All of the following are true regarding unearned revenues except:

Accepted Answer

A)  They are payments received in advance of services performed.
B)  The adjusting entry for unearned revenues increases assets and increases revenues.
C)  The adjusting entry for unearned revenues increases revenues and decreases liabilities.
D)  They are liabilities.
E)  As they are earned,they become revenues.F) B) and C)
G) A) and B)

Question 10

Profit margin is defined as:

Accepted Answer

A)  Revenues divided by net sales.
B)  Net sales divided by assets.
C)  Net income divided by net sales.
D)  Net income divided by assets.
E)  Net sales divided by net income.F) C) and E)
G) A) and C)

Question 11

Two main accounting principles used in accrual accounting are expense recognition and full closure.

Accepted Answer

A) True 
 B)False

Question 12

Recording expenses early overstates current-period income; recording expenses late understates current period income.

Accepted Answer

A) True 
 B)False

Question 13

The correct adjusting entry for accrued and unpaid employee salaries of $9,000 on December 31 is:

Accepted Answer

A)  debit Salary Expense,$9,000; credit Cash,$9,000
B)  debit Salary Expense,$9,000; credit Fees Earned,$9,000
C)  debit Salary Expense,$9,000; credit Prepaid Salary,$9,000
D)  debit Salary Expense,$9,000; credit Salaries Payable,$9,000
E)  debit Salaries Payable,$9,000; credit Salary Expense $9,000F) All of the above
G) B) and C)

Question 14

Asset and liability balances are transferred from the adjusted trial balance to the balance sheet.

Accepted Answer

A) True 
 B)False

Question 15

Flo's Flowers' current ratio is 1.3.The industry average for the current ratio is 1.2.This indicates that Flo's can cover its short term liabilities with its short term assets.

Accepted Answer

A) True 
 B)False

Question 16

A company purchased new furniture at a cost of $16,000 on January 1.The furniture is estimated to have a useful life of 6 years and a $1,000 salvage value.The company uses the straight-line method of depreciation.What is the book value of the furniture on December 31 of the first year?

Accepted Answer

A)  $16,000
B)  $15,000
C)  $2,500
D)  $13,500
E)  $13,333F) All of the above
G) B) and C)

Question 17

A work sheet contains all of the balances for each account and therefore may be used as a substitute for the set of financial statements.

Accepted Answer

A) True 
 B)False

Question 18

On December 1,Orenthal Marketing Company received $3,600 from a customer for a 2-month marketing plan to be completed January 31 of the following year.The cash receipt was recorded as unearned fees.The adjusting entry for the year ended December 31 would include:

Accepted Answer

A)  a debit to Earned Fees for $3,600.
B)  a debit to Unearned Fees for $1,800.
C)  a credit to Unearned Fees for $1,800.
D)  a debit to Earned Fees for $1,800.
E)  a credit to Earned Fees for $3,600.F) A) and B)
G) B) and E)

Question 19

A company performs 20 days of work on a 30-day contract before the end of the year.The total contract is valued at $6,000,with payment received in advance.The $6,000 cash receipt was initially recorded as Unearned Revenue.The required adjusting entry includes a $4,000 debit to Unearned Revenue.

Accepted Answer

A) True 
 B)False

Question 20

A classified balance sheet differs from an unclassified balance sheet in that:

Accepted Answer

A)  An unclassified balance sheet is never used by large companies.
B)  A classified balance sheet groups items into the broad categories of asset,liability,and equity.
C)  A classified balance sheet presents information in a manner that makes it easier to calculate a company's current ratio.
D)  A classified balance sheet will include more accounts than an unclassified balance sheet for the same company on the same date.
E)  A classified balance sheet is not usually provided to outside parties.F) B) and E)
G) All of the above

Exam 3: Adjusting Accounts for Financial Statements

Explain how the owner of a company uses the accrual basis of accounting.

Correct Answer
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The owner recognizes that financial info...
View Answer

Current liabilities are cash and other resources that are expected to be sold,collected or used within one year or the company's operating cycle whichever is longer.

Correct Answer
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The usual order for the asset subgroups of a classified balance sheet is:

Correct Answer
verified

Asset and liability balances are transferred from the adjusted trial balance to the balance sheet.

Correct Answer
verified

A work sheet contains all of the balances for each account and therefore may be used as a substitute for the set of financial statements.

Correct Answer
verified

A company purchased new furniture at a cost of $16,000 on January 1.The furniture is estimated to have a useful life of 6 years and a $1,000 salvage value.The company uses the straight-line method of depreciation.What is the book value of the furniture on December 31 of the first year?

Correct Answer
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During the closing process,Retained Earnings is closed to the Dividends account.

Correct Answer
verified

All of the following are true regarding unearned revenues except:

Correct Answer
verified

A company performs 20 days of work on a 30-day contract before the end of the year.The total contract is valued at $6,000,with payment received in advance.The $6,000 cash receipt was initially recorded as Unearned Revenue.The required adjusting entry includes a $4,000 debit to Unearned Revenue.

Correct Answer
verified

Accumulated depreciation is shown on the balance sheet as a subtraction from the cost of its related asset.

Correct Answer
verified

Flo's Flowers' current ratio is 1.3.The industry average for the current ratio is 1.2.This indicates that Flo's can cover its short term liabilities with its short term assets.

Correct Answer
verified

The current ratio is computed by dividing current liabilities by current assets.

Correct Answer
verified

A classified balance sheet differs from an unclassified balance sheet in that:

Correct Answer
verified

The correct adjusting entry for accrued and unpaid employee salaries of $9,000 on December 31 is:

Correct Answer
verified

Profit margin is defined as:

Correct Answer
verified

Two main accounting principles used in accrual accounting are expense recognition and full closure.

Correct Answer
verified

Correct Answer
verified

On December 1,Orenthal Marketing Company received $3,600 from a customer for a 2-month marketing plan to be completed January 31 of the following year.The cash receipt was recorded as unearned fees.The adjusting entry for the year ended December 31 would include:

Correct Answer
verified

Normally closing entries are first entered in the general journal and then posted to the work sheet.

Correct Answer
verified

Recording expenses early overstates current-period income; recording expenses late understates current period income.

Correct Answer
verified

Exam 3: Adjusting Accounts for Financial Statements

Explain how the owner of a company uses the accrual basis of accounting.

Correct AnswerverifiedThe owner recognizes that financial info...View AnswerShow Answer

Current liabilities are cash and other resources that are expected to be sold,collected or used within one year or the company's operating cycle whichever is longer.

Correct AnswerverifiedShow Answer

The usual order for the asset subgroups of a classified balance sheet is:

Correct AnswerverifiedShow Answer

Asset and liability balances are transferred from the adjusted trial balance to the balance sheet.

Correct AnswerverifiedShow Answer

A work sheet contains all of the balances for each account and therefore may be used as a substitute for the set of financial statements.

Correct AnswerverifiedShow Answer

A company purchased new furniture at a cost of $16,000 on January 1.The furniture is estimated to have a useful life of 6 years and a $1,000 salvage value.The company uses the straight-line method of depreciation.What is the book value of the furniture on December 31 of the first year?

Correct AnswerverifiedShow Answer

During the closing process,Retained Earnings is closed to the Dividends account.

Correct AnswerverifiedShow Answer

All of the following are true regarding unearned revenues except:

Correct AnswerverifiedShow Answer

A company performs 20 days of work on a 30-day contract before the end of the year.The total contract is valued at $6,000,with payment received in advance.The $6,000 cash receipt was initially recorded as Unearned Revenue.The required adjusting entry includes a $4,000 debit to Unearned Revenue.

Correct AnswerverifiedShow Answer

Accumulated depreciation is shown on the balance sheet as a subtraction from the cost of its related asset.

Correct AnswerverifiedShow Answer

Flo's Flowers' current ratio is 1.3.The industry average for the current ratio is 1.2.This indicates that Flo's can cover its short term liabilities with its short term assets.

Correct AnswerverifiedShow Answer

The current ratio is computed by dividing current liabilities by current assets.

Correct AnswerverifiedShow Answer

A classified balance sheet differs from an unclassified balance sheet in that:

Correct AnswerverifiedShow Answer

The correct adjusting entry for accrued and unpaid employee salaries of $9,000 on December 31 is:

Correct AnswerverifiedShow Answer

Profit margin is defined as:

Correct AnswerverifiedShow Answer

Two main accounting principles used in accrual accounting are expense recognition and full closure.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

On December 1,Orenthal Marketing Company received $3,600 from a customer for a 2-month marketing plan to be completed January 31 of the following year.The cash receipt was recorded as unearned fees.The adjusting entry for the year ended December 31 would include:

Correct AnswerverifiedShow Answer

Normally closing entries are first entered in the general journal and then posted to the work sheet.

Correct AnswerverifiedShow Answer

Recording expenses early overstates current-period income; recording expenses late understates current period income.

Correct AnswerverifiedShow Answer

Correct Answer
verified
The owner recognizes that financial info...
View Answer

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